Insas Berhad 12-JUN 2014

A HIDDEN GEM FROM MALAYSIA

A mini conglomerate with good assets, good catalyst and undervalued stock; no coverage, unloved and
ignored by the market.
Business includes stockbroking, finance and leasing, fashion retail (brands include Etienne Aigner, Hugo
Boss, Christian Lacroix, Cole Haan, Emilio Pucci, Ermenegildo Zegna, Furla, Mauboussin, Stuart
Weitzman, Tods and +IT), food & beverage (Dome Caf), venture capital in technology and bio-science,
property development and car rental etc.
Investment Thesis
A good value play with visible catalyst. Company has huge liquid assets, low debt and good associates
with good growth story for the next few years. Company selling at huge discount to NTA and low PE.
Although management does have a stake, the overall structure is still weak and opens the company for
activist investors who can push for value enhancing initiatives for minority shareholders.
Total Shares Outstanding 693.334 mil. Treasury 13.522 mil.
Mcap RM788.58 mil (USD245.28 mil); price RM1.16/share on June 12, 2014.
Total Equity on Balance Sheet RM1,176 mil or USD365.8mil - 31 Mar 2014 quarter (filed with Bursa
Malaysia). Exchange rate: USD1 = RM3.215.

Company trading at a HUGE 32.9% discount to NAV of RM1.77/share

Analysis of assets:



High proportion of Current Assets with liquid/cash assets (Financial assets + Deposits + Cash) ~ RM568
mil accounting for more than 50% of current assets!

Associate companies at LOW historical valuation. Just to list the below associate:
Inari Amertron Berhad (Mcap ~RM1,408 bil); an associate company, manufactures wireless microwave
telecommunication products and wireless broadcast card, as well as provides electronic manufacturing
services in Malaysia and Singapore. Insas holds 167.789 mil shares or 33.13% of the company (Bursa
Malaysia announcement dated 29 May 14); price RM2.78/share (June 12, 2014) for RM466.45mil. Also
owns 28.898 mil Inari warrants; price RM2.36. Inaris biggest customer is Avago Tech (Nasdaq:AVGO;
mcap USD18.1 bil) and growing sales from Agilent Tech (NYSE:A; mcap USD19.6B). Company has good
earnings visibility and highly rated by analysts. Total value of Insas holding ~RM534.65mil.

On Balance Sheet Associate amount is RM134.186mil. Inaris holding alone is RM534.65mil;
undervalue by RM400.5mil

Other holdings most likely recorded at historical pricing:
Ho Hup Construction Company Berhad (Mcap RM417.92mil); engaged in foundation engineering, civil
engineering, building contracting works, and plant and machinery hiring primarily in Malaysia. It
operates through Construction, Property Development, Manufacturing, and Others segments. Insas
holds 24.43 mil shares for RM33.2mil.

Formis Resources Berhad (Mcap RM279mil); is engaged in the information technology business in
Malaysia, Singapore, Thailand, and Indonesia. The company operates in five segments: Distribution,
Networks, Software, Solutions, and Systems. Insas holds 41mil shares for RM29.3mil.

Overall lots of hard tangible assets with liquid assets forming the bulk of it.


Analysis of liabilities:




Non-current liabilities and total liabilities can easily be covered by just the short term liquid assets!

Conclusion: Just by adding the undervaluation of its holding in Inari will add another RM0.58/share;
giving the stock a huge discount of 50.6% to revised NAV of RM2.35. Also, for the current year, its first 9
months EPS is RM0.2; so current FY14 PE is conservatively 5.8times; undemanding. This company has
been penalized because of its multiple business segments, fluctuating revenue and net income in the
past. This recently has changed greatly with its holding of Inari Ameritron; which will add a steady and
visible stream of revenue for Insas.